Rio Tinto’s iron ore output falls 2% year-on-year
Rio Tinto reported lower quarterly iron ore output as wet weather and labour shortages impacted its mine and port operations in Western Australia.
Above average wet weather in the mines and workforce availability disrupted maintenance during the quarter, Rio said, while Tropical Cyclone Seroja impacted operations in April, reports Reuters.
Production for the quarter stood at 76.4 million tonnes, down 2% from the same period last year.
“You’d have to suggest that its a pretty average result. They have not delivered iron ore into a solid pricing environment,” said David Lennox at Fat Prophets in Sydney.
“There’s nothing that they can do about wet weather – it may be that they are going to have to live with changing environmental conditions. What will save them is the fact that they have got higher commodity prices generally, especially iron ore and copper.”
The world’s biggest iron ore producer shipped 77.8 million tonnes (mt) of the commodity in the quarter ended March 31, up 7% compared with 72.9 mt last year. It maintained its forecast of shipping between 325mt and 340mt of iron ore in 2021.
Rio has benefited from strong demand for its higher quality Pilbara blend products due to solid margins at China steelmakers as construction activity and steel demand in the first quarter eclipsed 2020 and 2019 levels.
China’s renewed focus on cutting steelmaking emissions will likely restrain steel exports in 2021, supporting margins globally, it said.
Copper production fell 16% on year ago levels after covid-19 prevention measures limited labour availability in Escondida in Chile.
Its Oyu Tolgoi copper shipments have been impacted by Chinese boarder restrictions due to increased cases of covid-19.
“We declared force majeure on shipments from 30 March and continue to work closely with authorities and our customers to manage the risk of supply chain disruptions,” it said.
“Rio has resumed cross-border concentrate shipments into China on 15 April however, the situation is very fluid with the covid-19 resurgence in Mongolia.”
Low carbon world needs $1.7trn in mining investment
According to a new report from consultancy Wood Mackenzie, mining companies need to invest nearly $1.7trn in the next 15 years to help supply enough copper, cobalt, nickel and other metals needed for the shift to a low carbon world.
Cutting carbon emissions
The United States, Britain, Japan, Canada and others raised their targets on cutting carbon emissions to halt global warming at a summit in April hosted by US President Joe Biden.
Meeting those targets will need large-scale deployment of electric vehicles, storage for power generated from renewables and electricity transmission, all of which require industrial materials, such as lightweight aluminium and metals used in batteries such as cobalt and lithium.
Wood Mackenzie analyst Julian Kettle calculated miners needed to invest about $1.7trn during the next 15 years to “deliver a two-degree pathway - where the rise in global temperatures since pre-industrial times is limited to 2°C”.
“At an industry level, there seems to be reticence around investing sufficient capital to develop future supply at the pace and scale demanded by the energy transition (ET),” he said.
Mining firms are wary of making heavy investments after their experience of the last decade when they invested in new capacity just as demand peaked, leading to a collapse in prices and revenues. They also need to please investors, who are unlikely to want to see dividends diverted to capital spending.
Rising demands of investors related environment, social and governance (ESG) issues further add to the challenge.
Australia, Canada and Western Europe carry a low ESG risk but some of the best resources are in high-risk areas, such as Democratic Republic of Congo, which sits on about half the world’s cobalt reserves according to the U.S. Geological Survey. “Given the need to meet tough decarbonisation and ESG targets, Western governments, lenders, investors and consumers will need to get comfortable operating in jurisdictions where ESG issues are more complex,” Kettle said.
Kettle said government support was needed to help miners comply with ESG issues to ensure production from high-risk areas was conducted in an acceptable way to consumers.
“Then, and only then, will the West be able to secure sufficient volumes of the raw materials needed to pursue the energy transition in the timescales envisaged.”